Retirees See the Value in Rentals

LAST October, when Bob and Connie Lott decamped from their first post-retirement home in Florida for an “active adult” complex back in New Jersey near their daughter’s home, their friends in both locales expressed skepticism.

It wasn’t that people didn’t think the Lotts, both in their mid-70s, were up to the move. The question was: why New Jersey?

“ ‘It’s so expensive! The taxes are terrible!’ That’s what they all said,” Mr. Lott recounted. “Everyone asked me, ‘How much taxes are you going to have to pay?’ ”

Mr. and Mrs. Lott became renters at a newly built age-restricted complex here in picturesque Chester, a 22-unit collection of town homes called Black River Commons. The couple leased a two-bedroom with more than 2,000 square feet of living space, ample storage — and the promise of very low utility bills, thanks to a geothermal heating system — for a base price of $2,100 per month.

“It has worked out great,” said Mrs. Lott, as she stood gazing out the kitchen windows facing a wooded lot one recent morning. “We owned homes for 50 years. This is also our home — no difference.”

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TENANTS Connie Lott, and her husband, Bob, returned to New Jersey from Florida. Credit
Juan Arredondo for The New York Times

According to a recent report done for the New Jersey Home Builders Association, the market for “active adult” condominiums has gone rickety, to say the least. But there is increasing evidence that the rental market for that age group could potentially take off. “Maybe we’re leading the charge,” Mr. Lott said jokingly.

For years now, New Jersey residents who are 55 years old and over have been migrating out of the state at one of the highest rates in the country, according to Jeffrey G. Otteau, a housing analyst. His firm, the Otteau Valuation Group, conducted the builders’ study.

Mr. Otteau said that the most recent census data showed that New Jersey has the highest cost of living of any state. Its per-capita tax rate is also the highest, and its housing costs are second highest, after California. That combination presents large burdens for anyone living on a fixed income.

At the same time, there is a glut of recently built age-restricted housing, Mr. Otteau said. He projects that it would take 229 months — or 19 years — to sell all the units now on the market, if both built and approved projects are considered.

The statistic was cited last month at the State Legislature when two bills were introduced to make it easier for municipalities to lift age restrictions on previously approved projects.

The rental enclave where the Lotts live was built as a “prototype alternative” to the sprawling “active adult” complexes — with lavish clubhouses and extensive recreational amenities — that proliferated around New Jersey during the real estate boom, said its developer, Bill Asdal of Asdal Builders.

Mr. Asdal, a former vocational education teacher who has been active in research and demonstration projects of energy-efficient construction around the country, designed Black River Commons to rely entirely on a geothermal heating and cooling system.

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They rent in Black River Commons in Chester.Credit
Juan Arredondo for The New York Times

“There are no fossil fuels or combustible energy sources at work here,” he said. Rather, a system of water-filled pipes and solar-powered fans employs the earth’s natural heat to condition temperatures inside the homes, which are built to create air-tight “envelopes,” he said.

Utility bills for a couple living at the complex have so far been averaging about $120 per month, according to Mr. Asdal. Mr. Lott confirmed that this was true for him and his wife, except for one month when the controls in his unit were mistakenly set awry.

Several larger building companies have contacted Mr. Asdal to hear about the use of a geothermal system, he said.

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The state’s largest builder of age-restricted housing, K. Hovnanian Homes, has geothermal heating “on the radar,” but no plans to use it as yet, said Douglas Fenichel, a company spokesman.

Mr. Fenichel also said that the company did not currently build rental housing, and had no plans to do so.

Nationally, however, both Mr. Asdal and Mr. Otteau pointed out, the number of renters is increasing.

“Historically, the ratio of ownership to rental is about 60 percent to 40 percent,” Mr. Otteau said. During the housing boom years, the proportion of home owners rose sharply, to 69 percent in New Jersey in 2005.

“It is now about 67 percent, and falling back toward 60,” he said. “This is going to play out in all areas of the housing market, including the active adult and older age groups.”

Some people over age 55 will be essentially forced to consider rental housing, he added, if their investments have gone sour, or the value of their homes has fallen, because they will need to use whatever equity they have left to pay for day-to-day living expenses.